You are here: Home » Economy & Policy » News
Business Standard

Govt considering Rs 1 trn extra borrowing to offset fuel-tax cut: Report

The loss to the exchequer due to the recent excise duty cuts will have to be borne through additional market borrowings, says Bloomberg.

Topics
Fuel prices | Central Excise | India economy

Siddhartha Singh | Bloomberg 

Price rise in fuels will only reflect in April numbers
Price rise in fuels will only reflect in April numbers

India will probably borrow the entire 1 trillion rupees ($12.9 billion) that the government will forgo as revenues due to a cut in gasoline and diesel levies, according to people familiar with the matter.

Higher collections from the goods and services tax as well as personal income taxes will be neutralized by additional spending on food and fertilizer subsidies that the government is giving to the poor and farmers, said the people, who declined to be identified as the discussions are private.

The loss to the exchequer due to the recent excise duty cuts will therefore have to be borne through additional market borrowings, the people said. Calls made to a finance ministry spokesman were unanswered outside of business hours in New Delhi.

The mounting debt load will probably spook India’s bond market, where yields on benchmark 10-year notes have surged over the past month. The Reserve Bank of India, which is already managing a record borrowing plan, surprised investors with an off-cycle increase in interest rates this month.

ALSO READ: Centre reduces excise duty on petrol by Rs 8 and on diesel by Rs 6/litre

Over the weekend, the federal government cut levies on pump prices of gasoline and diesel, waived import tax on coking coal and increased payouts on fertilizers as well as cooking gas for the poor. It lowered excise duty on diesel by 6 rupees ($0.077) a liter and gasoline by 8 rupees, according to a tweet from Finance Minister Nirmala Sitharaman.

The revenue loss comes at a time when investors are staring at a record borrowing program from the government, surging price pressures as reflected in the wholesale and consumer price index, and the prospect of sharp interest rate increases by the central bank.

India budgets to raise about 14.3 trillion rupees through debt issuances in this financial year through March 2023. The entire borrowings are in local currency, with banks and insurance companies the biggest buyers of sovereign debt.

Analysts like Barclays Plc’s Chief India Economist Rahul Bajoria are raising their budget deficit estimates. Bajoria expects India’s budget gap to be at 6.9% for fiscal year 2022-23, up from New Delhi’s forecast of 6.4% of gross domestic product.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sun, May 22 2022. 14:56 IST
RECOMMENDED FOR YOU
.